Greenwashing? You’re going to need more than soap and water!

Key Points

Jurisdictions such as Australia, Papua New Guinea, Fiji and Solomon Islands prohibit the use of false or misleading statements in advertising and other communications. This prohibition captures statements that constitute greenwashing.
Regulators in Australia have issued fines and taken other enforcement action against businesses engaging in greenwashing.
Businesses operating across the Pacific should be aware of greenwashing and how to avoid it as media investigations (such as into NIHT Limited’s carbon offsetting scheme in PNG) indicate that greenwashing is widespread.

Greenwashing is defined broadly as disinformation or misleading information regarding a product to make it seem more green, ethical or eco-friendly. Regulators in Australia and elsewhere have seen a marked increase in greenwashing as businesses follow the lucrative “green dollar” in an attempt to sell products and services to consumers trying to minimise their impact on the planet. For example the Australian Competition and Consumer Commission (ACCC) conducted a sweep of 247 businesses which indicated 57% of businesses were making concerning claims.[1]

In response to the rise of greenwashing, regulators are starting to do more. In Australia, the Senate is currently undertaking a review of greenwashing practices and associated regulations.[2] Meanwhile, securities watchdog, the Australian Securities and Investments Commission (ASIC) is already taking action against businesses making dodgy or unsubstantiated claims.

This article provides some information on the type of penalties your business may face for greenwashing, how that is having an impact on operations in the Pacific and some simple ways you can better avoid greenwashing in your marketing.

Emerging Enforcement action in Australia

Since 1 July 2022 ASIC has taken enforcement action or interventions against 35 businesses. The enforcement steps taken by ASIC has included:

23 corrective disclosure outcomes;
11 infringement notices including fines in excess of AUD 50,000; and
The commencement of one civil penalty proceeding.

Some specific examples of enforcement actions taken by ASIC are set out below.

Tlou Energy

On 25 October 2022, an Australian energy company called Tlou Energy Limited paid AUD $53,280 in infringement notices issued by ASIC. The infringement notices were issued due to concerns that Tlou “did not have a reasonable basis to make the [following] representations, or that the representations were factually incorrect:”

electricity produced by Tlou would be carbon neutral;
Tlou had environmental approval and the capability to generate certain quantities of electricity from solar power;
Tlou’s gas-to-power project would be ‘low emissions’; and
Tlou was equally concerned with producing ‘clean energy’ through the use of renewable sources as it was with developing its gas-to-power project.

The payment of the infringement notice is not an admission of guilt.

Mercer Superannuation (Australia) Limited

More recently, ASIC launched court proceedings in the Federal Court of Australia for “allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.”

Mercer advertises that members can select “Sustainable Plus Investment Options” which are marketed ‘for potential members that are deeply committed to sustainability’. These investment options were meant to exclude carbon intensive fossil fuels like thermal coal, and included other exclusions such as alcohol and gambling.

However, upon review ASIC found the products invested in:

15 companies involved in the extraction or sale of carbon intensive fossil fuels (including AGL Energy Ltd, BHP Group Ltd, Glencore PLC and Whitehaven Coal Ltd);
15 companies involved in the production of alcohol (including Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV and Treasury Wine Estates Ltd); and
19 companies involved in gambling (including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited and Tabcorp Holdings Limited).

The court proceedings are ongoing.

Greenwashing in the Pacific

Like in Australia, jurisdictions such as Papua New Guinea, Fiji and Solomon Islands require business to not make false or misleading statements to consumers. As such, greenwashing is prohibited under general consumer protections.

Despite this, greenwashing is widespread and some businesses have been caught out building ‘green’ businesses around false claims. This became evident in New Ireland, Papua New Guinea where an ABC Four Corners report investigated NIHT Limited’s operations.

NIHT Limited was advertising the sale of carbon credits to businesses in Australia and elsewhere, allegedly backed by virgin forests in New Ireland, that would be set aside to offset pollution. Despite NIHT Limited receiving over AUD 5 million for carbon credits it had only paid landowners PGK 200 (~AUD100) each and failed to meet other obligations such as building public infrastructure and housing for local communities.

There are several legal implications of NIHT Limited’s allegedly false and misleading claims, these range between the following:

1. Carbon credits are a regulated financial product and the sale of carbon credits in Australia is overseen by ASIC;

2. It is unclear whether NIHT Limited has complied with statutory and international obligations it owes to landowners who must be compensated for parting with their land and grant prior, free and informed consent when their rights are affected; and

3. Whether commitments made under the Paris Agreement concerning nationally determined contributions to the reduction of carbon emissions will be impacted.

Investigations are continuing.

How to avoid greenwashing

The ACCC flags certain statements as particularly ‘risky’ or more likely to be associated with greenwashing. These include, making vague and unqualified claims, not providing substantiating information in order to validate a claim, and making absolute claims. Examples of these may be using terms such as “green”, “responsible”, “kind to the planet”, “zero emissions”, “100% recycled” or “plastic free”, and not providing evidence.

So its best to avoid such claims!

ASIC has gone one step further and issued Information Sheet 271 which provides questions businesses should ask themselves before making environmental claims in relation to a financial product, service or investment.

Before making a claim, you should ask yourself:

Is your product true to label?
Have you used vague terminology?
Are your headline claims potentially misleading?
Have you explained how sustainability-related factors are incorporated into investment decisions and stewardship activities?
Is there a reasonable basis for a stated sustainability target?
Is it easy for investors to locate and access relevant information?

Although Information Sheet 271 applies only to ASIC regulated businesses, these questions are a great starting point to double-check whether you are engaging in greenwashing.

Next steps

Sometimes its not clear whether the information you have provided or the claim you have made is not okay or unsubstantiated. As regulators become more aware and steps are taken to regulate greenwashing, businesses must take additional steps to verify that their statements are accurate and not misleading.

If you require more information or are still unsure whether you’re engaging in greenwashing contact us.

[1]https://www.accc.gov.au/system/files/Greenwashing%20by%20businesses%20in%20Australia.pdf [2]https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Greenwashing